China Cotton Auction: Trading Companies Increasing Inventory

MUMBAI (Commoditiescontrol): China Cotton Auction: Trading Companies Increasing Inventory

The auction which has entered its 17th day yesterday continued to have a turnover above 99 percent pointing to

robust demand in the local market.

Spot Market News

Inland trading companies are focusing more on the auction rather than Xinjiang 2015/16 styles as they find the

styles available on auction to be better in price, micronaire and fiber length. Inventories with trading companies

are on the lower side in small lots and lacks uniformity. Thus physical market in Xinjiang is witnessing lower activity

since the start of the Auction on 3rd May.

Auction Quantity

Auction commenced on 3rd May. Cotton being auctioned is that of the years 2012-13 and 2013 - 14.

Total Quantity Offered	Total Quantity Sold	Total Domestic Cotton Sold	Total Imported Cotton Sold
383069.4	380905.9	148074.6	232831.3

Quantity in Metric Tons

From 3rd May to 19th May 380905.9 tons of cotton or 99.44 percent of total quantity offered has been sold in the auction.

Share of Imported cotton sold so far stood at 60.78 percent yesterday down from 63.82 percent on Wednesday. Share

of domestic cotton increased to 38.65 percent yesterday from 35.59 percent on Wednesday.

Quantity on offer increased marginally yesterday to 25578.2 metric tons from 25003.1 metric tons offered on Wednesday.

Average quantity stood offered until yesterday stood at 29466.87 tons. Quantity of domestic cotton offered increased

yesterday by 29.72 percent while imported cotton offered reduced further by 47.41 percent.

Ratio of Sales To Domestic and Imported Cotton

Ratio of Domestic Cotton being offered has now reached 81.63 percent of the quantity on offer. Share of imported

cotton on offer has fallen to 18.37 percent. Since 12th May quantity of domestic cotton offered has been slowly

increasing while that of imported cotton has been reduced. Of the 20885.16 tons of domestic cotton offered yesterday

20857.17 tons or 99.86 percent was sold while 100 percent of the imported cotton was sold.

Auction Turnover And Staple Length

Total turnover dropped yesterday to 99.89 percent from being 100 percent over the previous three days.

Staple length was marginally lower yesterday at 28.13 MM as compared to 28.50 MM on 18th May.

Auction Price

Average auction price fell to a new low yesterday. Average price yesterday stood at 12086 yuan per ton or $0.906 per

pound which was a drop of 0.91 percent.

Highest selling price dropped marginally by 0.15 percent to 13150 yuan while lowest selling price increased by 4.24 percent

to 10310 yuan yesterday.

Floor Price For Week 16th To 20th May

Floor price for the coming week has been fixed at 11839 yuan per ton down by 92 yuan as compared to the previous week’s

floor price of 11931 yuan per ton.

Today’s Offer

Offer quantity has been increased further today to 27950.05 metric tons. Floor price remains at 11839 yuan.

1st Session – 15152.71 tons will be offered of which 11915.55 tons will be of domestic cotton while the remaining 3237.16 tons

will be of imported cotton.

2nd Session – 12797.34 tons will be offered of which 6150.43 tons will be domestic cotton while 6646.91 tons will be of

imported cotton.

Exchange Prices With Volumes

ZCE Cotton September

ICE Cotton July

In futures market ZCE prices moved higher on improving demand conditions in the local market while ICE futures fell on

the back of dollar strengthening yesterday.

Impact

Sharp drop in offer of imported cotton only suggests that quantity of the same in reserves is low. Regardless of what

is happening with imported cotton, domestic cotton turnover is impressive, albeit, with falling prices. The same is observed

as even though lowest selling price increased yesterday, average price fell suggesting that larger amounts of cotton has

been picked up at lower prices.

News of trading companies interested in increasing their inventories also points to a simple fact that they expect demand

for cotton to be higher in the coming days and prices of cotton in domestic market will remain supported until there is

clarity on fresh crop arrivals.

On the imported cotton front fall in ICE futures would truly make it attractive to increase imports, however, importers

will have to pay more in yuan terms for their cotton on account of dollar strength.

Hence local cotton demand from reserves should continue to be robust as long as quality on offer is acceptable to

the bidders and the positive sentiment will be spilt over to international markets as at some time imports of cotton will have to be increased.

(By Commoditiescontrol Bureau; +91-22-40015522)